Raw Material Supply Agreement Template for Saudi Arabia

A Raw Material Supply Agreement is a comprehensive contract that establishes the terms and conditions for the ongoing supply of raw materials between a supplier and buyer in Saudi Arabia. This agreement creates a structured framework that governs material procurement while ensuring compliance with Saudi commercial law, Sharia principles, and local regulatory standards including SASO requirements.

When do you need this document?

You need this agreement when establishing long-term supply relationships for raw materials critical to your manufacturing or production operations. Manufacturing companies require these contracts when sourcing metals, chemicals, or agricultural products from local or international suppliers. Industrial processors use these agreements to secure consistent supply of materials like petroleum products, minerals, or textile fibers. Trading companies and import/export businesses rely on these contracts to formalize relationships with overseas suppliers while ensuring compliance with Saudi customs and quality regulations. Mining companies and chemical producers also use these agreements to establish supply chains for specialized raw materials required for their operations.

Key legal considerations

Your agreement must clearly define material specifications and quality standards that comply with SASO regulations to avoid disputes over product acceptability. Include detailed pricing mechanisms that account for market fluctuations while protecting both parties from unreasonable price changes. Establish clear delivery terms including shipping responsibilities, risk allocation, and penalties for delayed deliveries. Address force majeure provisions that consider regional factors like political instability or natural disasters that could disrupt supply chains. Include intellectual property clauses if the raw materials involve proprietary formulations or processes. Incorporate dispute resolution mechanisms that specify whether conflicts will be resolved through Saudi commercial courts or alternative dispute resolution methods. Address termination provisions that protect your interests if the supplier fails to meet quality standards or delivery obligations.

Legal requirements in Saudi Arabia

Your Raw Material Supply Agreement must comply with the Commercial Court Law (Royal Decree No. M/32) which governs commercial transactions and business activities in the Kingdom. The contract must align with Saudi Contract Law derived from Sharia principles, ensuring that all terms are consistent with Islamic commercial law requirements including prohibition of excessive uncertainty (gharar) and interest (riba). If your agreement involves commercial agency relationships, ensure compliance with the Commercial Agencies Law (Royal Decree No. M/11) which regulates distribution arrangements. Environmental considerations must address the Environmental Law (Royal Decree No. M/165) if your raw materials involve chemicals or substances that could impact environmental protection. Quality specifications must meet SASO standards and regulations which define mandatory requirements for raw materials and products in Saudi Arabia. Ensure your agreement includes proper dispute resolution clauses that recognize the jurisdiction of Saudi Commercial Courts as established under Royal Decree No. M/93.